Are You Measuring These Key Drivers in Your Inventory?

Written by Kseniya Savelyeva

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Update on February 15, 2023 | 3 minute read
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While most dealers see the value in tracking inventory, other pressing needs, such as employee or cash-flow concerns can get in the way. But tracking metrics, including key drivers in inventory, effectively paves the way towards a company’s profitability and longevity in the marketplace.

Author and speaker Stephen Covey said, “The key is not to prioritize what’s on your schedule, but to schedule your priorities.”

With that in mind, we took a look at some of the most important things to measure while managing a busy dealer operation. Let’s explore the most important drivers for you to set your business up for success.

1. Inventory TurnsInventory Turns

Simply put, inventory turns are the number of times inventory is replaced in a year. A high turnover rate shows that inventory levels are too low, resulting in customers not getting what they need. A low turnover rate could reflect overstocking, the unit getting outdated or even failed marketing efforts.

Edward Dismukes of Wilson Dismukes Power Equipment and Parts in Alabama uses dealership management software to manage slow-moving parts.

“Inventory is cash sitting on your shelf,” said Edward, “If I go into my inventory management system and notice we have a part that no longer sells well, and we have eight of them, I can click and drop my min-and-max setting down to not carry that product anymore. While I still have these eight items in stock, at least, I’m not re-ordering them anymore.”

A good rule of thumb for inventory turns is five to six per year.

2. Parts Sales ReportsParts Sales Reports

Many dealers now see themselves as a “solution store,” when positioning against online or big-box retailers, and tracking parts is a secret weapon. This is very true for Mike Traweek of Ashland Ace Hardware in Virginia.

“Service is our major differentiator overall,” said Mike. “For example, we provide service for warranty and repair, which sets us apart from online retailers and big-box stores.”

How does this relate to parts when thinking of key drivers in inventory? Fast service means quick access to inventory. You want to make sure that you “always have the part” for your customer, especially when they are in an emergency. Identifying those fast-movers using parts sales reports means that you can stock a lot of them so you can be there when your customer needs you the most.

3. Average Transaction Value (ATV)ATV

Retailers of all kinds, including dealers, are looking at ATV nowadays. Why? Because with the same amount of foot-traffic, you can get more sales. Encouraging salespeople to upsell and cross-sell means that you can get more value with the same amount of overhead and marketing costs, for example, promotions such as bundle discounts are also a great strategy to get this accomplished.

Dealership management systems are great at encouraging your salespeople to upsell since you can easily see purchase history and similar products, so you can identify cross-sell or upsell opportunities.

Overall, this is a fast and easy way to create an immediate bump in profitability.

Last Word….

While carving some time out of the day to measure inventory can be a tough task unto itself for many dealers, it is worth the time spent. Managing inventory using these methods sets you up to building a strong and longstanding business.

If you are looking for more metrics, check out our insightful guide on the Key Metrics Every Dealer Must Track to Keep Themselves Profitable. This guide gives you a full overview of KPIs, metrics and even recommended frequencies. It is definitely worth a read.

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